Barclays Bank of New York v. Goldman

Decision Date22 June 1981
Docket Number80 Civ. 2546 (JMC).
PartiesBARCLAYS BANK OF NEW YORK, Plaintiff, v. Gordon GOLDMAN and Ruhama Goldman, Defendants and Third-Party Plaintiffs, v. DANKNER DIAMONDS (ISRAEL) LTD., Moshe Dankner and Yoram Dankner, Third-Party Defendants.
CourtU.S. District Court — Southern District of New York

COPYRIGHT MATERIAL OMITTED

Hawkins, Delafield & Wood, New York City (W. Cullen MacDonald and David B. Newman, New York City, of counsel), for plaintiff.

Szold & Brandwen, P. C., New York City (Alan G. Blumberg, New York City, of counsel), for defendants and third-party plaintiffs.

Marchi, Jaffe, Cohen, Crystal, Rosner & Katz, New York City (Ernest Allen Cohen, New York City, of counsel), for third-party defendants.

MEMORANDUM AND ORDER

CANNELLA, District Judge:

Plaintiff's motion for summary judgment is granted. Fed.R.Civ.P. 56.

The third-party defendants' motion (1) to dismiss the complaint for lack of subject matter jurisdiction is denied, Fed.R.Civ.P. 12(b)(1), and (2) to dismiss the third-party complaint for insufficiency of service of process, failure to state a claim upon which relief can be granted, and failure to plead the circumstances constituting fraud with particularity, is granted in part and denied in part. Fed.R.Civ.P. 9(b), 12(b)(5), 12(b)(6).

The third-party plaintiffs are granted leave to file an amended third-party complaint and to serve process on third-party defendant Dankner Diamonds (Israel) Ltd. within thirty days of the date of this Memorandum and Order.

FACTS

Plaintiff Barclays Bank of New York "Barclays" or "Bank" brings this diversity action against defendants Gordon Goldman and Ruhama Goldman the "Goldmans"1 as guarantors of debts incurred by third-party defendant Dankner Diamonds (Israel) Ltd. "DDIL", a diamond importer and dealer. The Goldmans have counterclaimed for the return of certain payments they say they were not obligated to make, and have also commenced a third-party action for indemnity against DDIL, a corporation organized in Israel with its principal place of business in New York, Moshe Dankner, a citizen and resident of Israel, and Yoram Dankner, a resident of New York. Moshe is Yoram and Ruhama's father and Gordon is Ruhama's husband.

On September 15, 1975, the Goldmans, who were at the time officers of DDIL, signed, as guarantors, a document entitled "Guarantee and Security Agreement" the "guarantee agreement".2 In pertinent part, the guarantee agreement provides that the guarantors (1) "absolutely and unconditionally guarantee to the Bank the prompt payment of claims of every nature and description of the Bank against DDIL ... and any and every obligation and liability of DDIL to the Bank ... of whatsoever nature and howsoever evidenced, whether now existing or hereafter incurred ... (all of the foregoing are hereinafter referred to as `Obligations')," (2) "consent that these Obligations or the liability of any other guarantor, surety, indemnitor, indorser, or any other party for or upon DDIL's Obligations ... may, from time to time in whole or in part, be renewed, extended, modified, accelerated, compromised, settled or released by the Bank ... without in any way affecting or releasing the liability of the guarantors hereunder," and (3) waive demand for payment from DDIL. The agreement further provides that the guarantors will pay an attorney's fee of fifteen percent of the principal and interest due if an attorney is used to enforce its terms.

At about the same time the guarantee agreement was signed, the Bank renewed a line of credit it had previously extended to DDIL. On September 30, 1975, P. G. Elkins, Barclays's vice president and manager, wrote to DDIL, to the attention of Gordon Goldman, as follows:

We are pleased to advise you that your Company's line of credit in our books has been renewed for a further year at the increased level of $75,000—.
The above line of credit is granted subject to the following terms and conditions:
1) The line to run for a period of one year to expire September 24, 1976 prior to which time it will be renewed.
2) Interest to be charged at the rate of 2% over the Bank's prime rate, payable quarterly in arrears.
3) The line to be secured by a pledge over inventory and accounts receivable with a U.C.C. filing.
4) The line to be guaranteed by Mr. & Mrs. G. Goldman.
5) Compensating balances of 15% of the line to be maintained.
6) The Bank to be provided with a "comfort" letter from the parent, M. Dankner & Sons Ltd. stating that should Dankner Diamonds (Israel) Ltd. have financial difficulties and not be able to meet its liabilities, M. Dankner & Sons Ltd. will ensure that the Bank will be repaid.
Should the above terms and conditions meet with your approval, please sign and return the attached copy of this letter signifying your agreement.3

On October 2, 1975, K. R. Pugsley, another Barclays vice president, wrote to DDIL to amend the September 30 letter, again to the attention of Gordon Goldman:

Further to our letter of September 30, 1975, in which we outlined the terms and conditions of the facility we have agreed to provide your company, we make the following amendment:
Borrowings are limited to 75% of the total amount of promissory notes held in our possession up to a maximum borrowing of $75,000 —.
All other terms and conditions remain unchanged. Please sign and return the attached copy of this letter signifying your agreement.4

Gordon countersigned and returned a copy of each letter to indicate DDIL's agreement therewith.

On five occasions between September 19, 1975 and May 6, 1977, Barclays loaned money to DDIL, totalling $105,000, secured by DDIL's inventory and promissory notes given to DDIL by its customers. On each occasion, Gordon executed a demand note on DDIL's behalf. In addition, Ruhama signed the first demand note, dated September 19, 1975, and Yoram signed the fifth demand note, dated May 6, 1977, both acting on DDIL's behalf.5 The demand notes are identical; each provides that Barclays may (1) sell all or part of the collateral "whenever in its discretion it considers such sale necessary for its protection," and (2) apply the proceeds from such disposition of the collateral "to the payment, in whole or in part, in such order as the Bank may elect, of one or more of the obligations, whether due or not due, absolute or contingent."6 Each note defines "obligations" to include "any and all liabilities and obligations of DDIL to the Bank and claims of every nature and description of the Bank against DDIL (including this note and any renewals, extensions or modifications thereof), whether now existing or hereafter incurred ...." Each loan carried an interest rate of two percent above the prime rate.

In July 1977, apparently without the Goldmans' knowledge, DDIL issued several checks in the total amount of $82,841.27, which the Bank honored and paid despite the fact that at the time no funds remained in DDIL's checking account with the Bank. Barclays then liquidated the collateral it held to secure the DDIL loans, receiving approximately $120,000 in proceeds. The Bank applied these proceeds first to cover the overdrafts and used the remainder to reduce the loan balance to $63,500. To date, this amount, plus interest, has not been paid either by DDIL or the Goldmans, despite the Bank's due demand on each. On May 6, 1980, the Bank commenced this action to enforce the guarantee agreement.

The Goldmans commenced a third-party action against Moshe and Yoram Dankner and DDIL on July 21, 1980. By order, the Court (Sweet, J.) authorized service on DDIL and Moshe in Israel by an individual authorized to serve process there.7 On August 20, 1980, the Goldmans filed an affidavit of an Israeli attorney which states that he had effected personal service on Moshe individually and as an officer and controlling shareholder of DDIL.8 According to both Moshe's common-law wife and his maid, however, the Dankners were not at home when the process server arrived and service was made only upon the maid, who was neither connected with DDIL in any way nor authorized by Moshe or DDIL as an agent to accept service on their behalf.9 Yoram's attorneys agreed to accept service of process on his behalf.10

In their third-party complaint, the Goldmans allege that they signed the guarantee agreement only on Moshe's personal assurance that all of DDIL's debts would be paid and on his oral promise that he would indemnify them against all claims asserted by Barclays. The Goldmans claim that Moshe has breached these promises and that the promises were fraudulent. The Goldmans also allege that Moshe orally promised Gordon that DDIL or Moshe would reimburse Gordon for any of DDIL's debts to other creditors that Gordon paid out of his personal funds. They claim that they expended $400,000 to this end and that Moshe has refused to reimburse them. They also claim that this promise too was false and fraudulent. Finally, the Goldmans allege that (1) Moshe and Yoram caused checks to be drawn on DDIL's checking account, made payable to companies controlled by Moshe, knowing that there were no funds to cover the checks, (2) they caused the payees improperly to accept the proceeds of the checks, and (3) they otherwise caused DDIL's assets to be transferred without fair consideration.

Barclays has moved for summary judgment. DDIL, Moshe and Yoram have moved (1) to dismiss the complaint for lack of subject matter jurisdiction, (2) to dismiss the third-party complaint against DDIL and Moshe for insufficiency of service of process,11 and (3) to dismiss the second, third, fourth and fifth causes of action in the third-party complaint for failure to state a claim upon which relief can be granted and for failure to plead fraud with particularity.

DISCUSSION
Barclays's Motion for Summary Judgment

The Goldmans acknowledge that they signed the guarantee agreement in September 1975 and do not dispute the Bank's claim that the five loans made to DDIL...

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